Q: What is a cross-collateralization clause? I’ve been told to watch out for this, but I don’t know what it is.
A: Cross-collateralization, sometimes referred to as bucket accounting, is not good for authors because it lets a publisher make deductions from the income of one work for sums owing on another work. Such sums can be charges for the cost of alterations, permission fees, fees for revisions, overpayments, or an unearned advance. The cross-collateralization clause is unfair because it gives the publisher de facto insurance against an unsuccessful project by permitting recovery from funds due to authors on other projects.
Here is how to spot these clauses, and what to do when you find them. First, a cross-collateralization clause is not likely to be labeled as such. It may be referred to as “Over Payments,” “Deduction of Sums Owing Under Other Contracts,” or “Joint Accounting.” Look for any language in the contract that authorizes the publisher to deduct money owed to the author for other works.
If the publisher refuses to delete the provision entirely try a compromise position: 1) that no deductions for sums owed under other contracts be made from an advance owed to the author, but rather, any deductions be made from the future income stream; 2) that unearned advances not count as sums owed to the publisher.
Ask Author Law
October 28, 2015